WHAT ARE WE LOOKING OUT FOR?
Second up on Market Data Guru’s 5 predictions for the world of market data in 2023 (https://lnkd.in/ghfVeVFn) is that after financial institutions, indeed any business, has presumably sorted out its costs and adopted market data strategies, then it must all be managed with the data workflows mapped. 2023 is a world where we must move beyond data to encompass and bring together all information used for and in decision making.
Market Data has always been seen as somewhat unique, and to be fair there is a great deal of truth in this because it relies upon high levels of real time delivery and bleeding edge technology. The impact of ‘The Cloud’ and belatedly ‘Big Data’ is changing the dynamic especially given the rise of Alternative Data, Commercial Data, and ESG which can be integrated into existing datasets.
What this means is financial institutions and vendors are going to have to change from micro to macro management of data, i.e. managing all digital content as non-market data information suppliers adopt commercial and contractual models from their more advanced market data brethren. There is also a technology impact as more information from a greater number of sources are shared on the same platforms,
Here are our 5 thoughts on Total Information Management:
1.What do we mean by Total Information Management?
2.Introducing the Total Information Environment
3.Businesses will sort out where market data and information should function organisationally
4.Businesses must blend their external data with their internal data
5.Smarter companies will define information as a strategic resource
5 THOUGHTS ANALYSED IN DETAIL
1 What do we mean by Total Information Management? There is more paid for and free information flowing into and around financial institutions than just market data. It is just market data makes up the largest cost, however the emergence of ESG Data and even more importantly Alternative Data is changing the dynamic. More and more information and data is being supplied electronically, and this needs to be managed. Equally these and new data sources are increasingly switching their IPRs, contracts, and pricing structures to market data style models.
It is logical to be aware of and manage all this information strategically instead of the current environment where business units, often even individuals, have local control over the information they use. This is not to remove the business driven requirements in identifying what they need to do their job, but switching to a more efficient and effective way of leveraging information as a resource.
2. Introducing the Total Information Environment. Management does not exist in a vacuum, especially for information and data. If it is to be used strategically then the entire environment must be considered. There is more to information and management than costs. Banks need to know their sources, the data’s provenance, constantly validated for quality, accuracy, consistently, and timeliness.
It is about proactive management, identifying new sources offering advantages, and existing sources losing their edge. The environment must be known, with the right tools in place to control, monitor, and report right the way across the usage spectrum to provide management with the outputs they require to invest in information and data. Critically businesses need to understand and map their data workflows. Knowing how information and data is processed and distributed by who, what, and where is an absolute must, and the target for 2023.
3. Market Data Functionally & Organisationally. Many financial institutions do not know what to do with market data management and administration. Too often for the value and impact it has, their market data teams have been under-resourced with experienced managers often let go to be replaced by new people starting to learn their trade.
Many banks place market data into Information Technology Departments, understandable as it grew out of Telecoms for management of delivery and infrastructure, however data and information is not the same thing as technology, both need each other but they are different. Others install market data in procurement where it becomes just another line item treated no differently to computers, furniture, and so on by generalists. Market data and information needs specialists. Sometimes market data can be found in Operations and/or Finance Departments, which makes more sense but cost then becomes important than utility. Where should it reside? Data and Information is used to make money, it belongs as a standalone hub within the business working for and with the business. This fits in with the ‘Total Information Management’ philosophy.
4. Blending Internal and External Data. This has been an objective of many financial institutions for some time, with varying degrees of success achieved. It is becoming more of an imperative for regulatory reasons, reporting, and performance measurement. Like external data, internal data needs to become a known quantity which is managed, controlled, monitored, and reported upon.
Once it becomes known it can then be put to use, and can be aggregated with any other data source. However there has to be internal oversight, and it makes sense for the market data team to perform this function, which becomes another pillar in the ‘Total Information Environment’.
5.Information and Data as a Strategic Resource. As we have stated information and market data is used to make money by providing the foundations for investment decision making. Having the wrong information, or the right information not delivered on time, leads to the inevitable, poor decisions. For many markets, particularly exchanges, each participating financial institution usually has exactly the same information as its peers, so accessibility to something different can provide that elusive edge. This is why the focus is shifting to new sources like Alternative Data.
It also elevates the importance of information and data as strategic resources to be leveraged, though at the same time validated. Market data usually comes from trusted and known sources, in contrast the world of alternative data and ESG data is still being discovered, with many dubious entities offering their wares. This places even more emphasis on the understanding of market data as a resource.
SUMMARY
One leading bank has already started on their journey towards ‘Total Information Management’, though they do not call it this, and are an outlier towards providing their business with a wider and better range of information and data coming from trusted sources. Sadly I could not get permission to name them.
What ‘Total Information Management’ is all about is simply knowledge. It melds knowing 100% of what information and data is flowing into the business through having the right tools to control, monitor, and report who is supplying what information to whom and where, which is managed strategically at the enterprise level for effective use at all decision making levels. This creates the ‘Total Information Environment’.
As the Chinese saying goes ‘A journey of a Thousand miles starts with a single step’, and there is no doubt even moving forwards with the concept of Total Information Management’ is challenging, let alone implementing it. However the strategic business benefits far outweigh the natural inclination for inertia.
In 2023 how much data consumers are willing to consider how information and data should be managed will define their future success.
This is an intriguing challenge.
Keiren Harris 25 January 2023
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For information on our consulting services please email knharris@datacompliancellc.com
